Steigrad gets Appeal Court win
Disgraced Bridgecorp director Peter Steigrad can claim against the failed financier's insurance policy for the cost of defending himself in a $442 million law suit, the Appeal Court has ruled.
The court has overturned an earlier High Court decision that Steigrad could not access Bridgecorp's directors' liability insurance to pay his defence costs in the case, which claims the directors breached their duties.
Steigrad was convicted of Securities Act offences related to Bridgecorp's 2007 collapse and sentenced to nine months' home detention, which he is currently serving.
He and his fellow directors now face a $442m damages claim being brought by Bridgecorp's receivers.
Bridgecorp had argued that a "charge" it had over the $20m QBE insurance policy prevented the directors from accessing the insurance money to meet their defence costs.
But the Appeal Court says the insurance contract provides for the directors' defence costs to be paid.
"Bridgecorp is not entitled to a statutory charge over insurance money lawfully payable by QBE to Mr Steigrad to reimburse his existing liability to pay defence costs," the court said in today's decision.
The ruling means that if the damages claim is successful, the pool of funds available to compensate Bridgecorp investors will be less because some of it will have been spent on the directors' defence bills.
The judgment also makes a ruling in a case between 3100 shareholders in failed carpet maker Feltex and its insurers and directors.
The shareholders claimed that the company's Chartis Insurance policy could not be used to pay the directors' defence bills in the shareholders' $150m case against them.
Because the two cases were so similar, the Appeal Court agreed to rule on them together.
The court has also said that the shareholders are not entitled to a charge over money from the Chartis policy that would go to reimbursing the directors for their defence costs.
Both Bridgecorp and the Feltex shareholders were ordered to pay costs to Steigrad and the Feltex directors.